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Debt Elimination 3
By: Roy Thomsitt
Planning To Achieve Debt Elimination
Once you have started the process of changing your debt mindset to be against
taking on consumer debt, then that is something you need to continue until it
becomes the norm in your life. In some ways it is like stopping smoking; trying
on will power alone is not enough, you need to get to the source of your problem
and permanently change it. That is why self hypnosis can be successful with
stopping smoking; it reaches the subconscious mind and re-educates it. With debt
elimination, it is the same; to succeed permanently you need to have changed the
way your mind works, not just consciously, but sub consciously too.
In parallel to changing your mindset, you need to plan your debt elimination
strategy. This will depend on you precise financial situation: your level of
debt, monthly income, monthly commitments, overdue debts and so on. So, I cannot
make specific suggestions for your circumstances, just give a few pointers to
what you can do to head down the road to debt elimination. You may well get some
benefit from debt counseling or financial planning advice at this stage, but
that depends on you.
Your chances of achieving debt elimination within, say, 5 years, will depend a
great deal on your own efforts, so if you can get through this part alone, then
that may strengthen your chances of success.
Budgeting For Debt Elimination
You need to take a long hard look at your present financial situation and how it
is likely to evolve into the future. For debt elimination to succeed, you need
to be in control of your finances and keep your finger on the pulse all the
time.
The starting point should be a list of your monthly outgoings. If you are unsure
of any item, then monitor it for a month to see. For example, you may not know
exactly how much you spend on food and other items from the grocery stores each
month. Just keep a record of them for a month to see what your monthly
expenditure is, but in the meantime use your best estimate.
You can then compare your monthly outgoings with your net income, and this will
be the basis of your budget as you develop a plan for debt elimination. You also
need to compile a list of your debts; how much is outstanding, what the monthly
payments are, and what the interest rate is.
As an example, let us say you have a net monthly income of $2500, and your total
outgoings, including debt and credit card repayments, are $2300. This means you
have $200 to spare. With your new, anti debt mindset, you want to use that $200
spare to get your most expensive debts cleared first. There is a good chance it
is the credit cards that are most expensive, so you can target the most
expensive credit card ie the one with the highest interest. You owe $600 on that
card, so in 3 months you can clear it. When cleared, you can move on to the next
most expensive.
Depending on your debt level this could be a long process; that's why you need
to plan it out and see how you will cut down that outstanding debt level over
the coming months and years. So long as the total debt level is reducing, you
are heading in the right direction.
Also, take a close look at those monthly outgoings. Are you sure there's nothing
that can be cut out or reduced? Of course there is, unless you've already gone
through that process recently. Be ruthless with this new mindset of yours; it
really is worthwhile, knowing there will come a day when you don't have to worry
about the odd few dollars here and there. Highlight those budget items that are
unavoidable, and make sure you pay those first every month, or at least have the
money earmarked.
If you rank your debts in order of interest rate cost, and go for the highest
first, you can work through them one by one. Need a morale boost to get you off
to a good start? Then choose the loan with the least outstanding, and clear that
first. It may not be the best financially, but if it gives you that quick
satisfaction, so the sacrifice may be worth it.
Debt elimination is not going to be an overnight happening. You need to be
prepared to plan for a few years. 5 years is always a good period to plan for in
business, and can be too in your personal life and finances. You may be amazed
at the transformations you can achieve in 5 years. But above all, you need to
maintain that anti debt mindset. After all, that is what will bring you to the
debt elimination pinnacle.
In the next article, we consider what to do if there is really no spare in your
monthly budget.
About the Author:
Roy Thomsitt is the owner and part author of http://www.eliminate-credit-card-debt-now.com
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